Elmar Altvater

Notes on Some Problems of State Interventionism

Written: 1972
Source: Kapitalistate, 1/1973, pp96-108; 2/1973, pp76-83.
First Published: "Zu einigen Problemen des Staatsinterventionismus", in Probleme des Klassenkampfs No. 3, May 1972.
Translated by: Peoples Translation Service, Berkeley, California
Transcription/Markup: Steve Palmer
Copyleft:  This work is published under a Creative Commons license.

1. Introduction[1]

This essay is an attempt to analyze the possibilities and limitations of state interventionism[2] which are present in bourgeois-capitalist society. However, in order to determine these possibilities and limitations, we must first discuss the functions of the state In capitalist society in a more general sense. Restricting this analysis to the economic function of state interventionism would obscure from the outset the functional conditions of a capitalist society and state, and the recognition of their possibilities and limitations.[3]

In the following sections we will first attempt to work out roughly the essential characteristics of the bourgeois state (I). We will examine in particular the creation of general, material conditions for production by the bourgeois state (II) and then turn to the attempts at governmental crisis management (III). In this regard the problem of stagnation will especially interest us (IV). In the concluding section, we will take as an example the question of whether and to what extent the advance of bourgeois science can effect state actions in a capitalist society (V). This set of problems is less the result of a developed, systematic effort to present the problem of the state, than a selection of issues according to their present political importance.

2. The "Autonomization" of the State in Bourgeois Society

Under capitalism the state is the instrument of capital's domination over the class of wage laborers. This assertion is a fact of political experience, which has been, and is still being demonstrated again and again in the hitherto existing history of the various capitalist nations. In this essay, we are concerned with only one aspect of the state's actions, namely its actions upon the various capital units ("Einzelkapitale"). The decisive questions in this respect for our investigation are: In what way is the actual coordination of a society brought about which is constituted by many capital units, and what is the role of the state in this context?

On the level of "capital in general"[4], as analyzed by Marx, the actual existence of capital is by presupposition a total social capital. Total social capital is the unified organization in the sense of being the real and general existence of the various capital units, whose subjective actions, determined by the given conditions, cause, as a result, "behind their backs", these general conditions to be the conditions of total capital ("Gesamtkapital"). The "laws of motion" of the capitalist mode of production thus relate always to the total social capital, never to the various single capital units, which nevertheless, through their actions are the unconscious means by which capitalist regularity is achieved. For it is not the "total capital" which transacts ("handelt"), but the capital units.

In their transactions, however, the capital units produce the conditions for the existence of total capital: the average conditions for exploitation, the same surplus rate, average profit rates. On the conceptual level of "capital in general", the average conditions and their regular movements are analyzed; that is, the transactions of capital units are not of interest as such, but only in terms of their results. To be sure, on the conceptual level of capital in general, the form is developed in which the general laws (as tendencies) of the capitalist mode of production come to fruition out of and in reaction to the transactions of the capital units. This form is competition, in which the immanent, inexorable laws of capitalist production prove themselves. Competition, however, is not mere form, which carries out contents indifferent to itself, but rather the form of the accomplishment of the immanent laws of capital

In a competitive market capital can be produced as total capital only to the extent that the capital units actually relate to one another. They can only do this, however, insofar as they are surplus-producing units. Not all social functions, though, can be performed in this sense by a capitalist society. Either the production of certain material conditions for production yields no profit, or the degree of generality of many regulations under given conditions is too great for them to be performed by capital units with their given special interests. It thus happens that in the capitalist form of production, the capital units constitute themselves as total social capital by competition and that this constitution can in no way be ascribed solely to competition. The reason for this hindrance has to do with capital itself; the specific form of social relations - (commodity exchange and the production of capital) - does not permit the development of certain social relations. If their production is not profitable or if their production occurs to a degree and under conditions which endanger the existence of the entire society (e.g., the destruction of the natural resources of a society, as an current example). Accordingly, capital cannot produce solely through the actions of the many capitals units the necessary social nature of its existence. At its base it requires a special institution, one which is not subject to its limitations as capital, one whose dealings are thus not determined by the necessity of surplus production, one which in this sense is a special institution "outside and above bourgeois society"[5], and one which at the same time provides within the undisputed framework of capital the immanent necessities which capital ignores. As a result of this, bourgeois society develops, in the state, a specific form expressing the general interests of capital.[6] The state can thus be conceived neither as a mere political instrument nor as an institution set up by capital, but rather, as a special form of the accomplishment of the social existence of capital along with and besides competition, as an essential moment in the social reproduction process, of capital.[7]

If the state expresses the general interest of capital, it does not do so in a manner free of contradictions. This is because the concept of the average existence of capital does not do away with (aufheben) the actions and interests of the myriad of capital units, which, as such, stand in contrast to one another. These contrasts are neither abolished by the competitive market, nor can they be attributed to this competition or to the "anarchy of the market", where they appear, nor can the state eliminate these contrasts. In this sense the state is therefore never an actual material total capitalist, but rather always an idealized or fictitious total capitalist.[8] This is the content of the category of the "autonomization of the state", of the "double nature" of bourgeois society as society and as state. At this point an important conclusion can be drawn; the state does not substitute for the competitive arena, but rather is aligned next to it. In relation to the law of value which conceptually encompasses the immanent laws of its own execution, this does not imply its substitution or its abolition but its corresponding modification. Thus the state makes the establishment of a society of disparate, individual interests historically possible by ensuring the foundations for the existence of this society. The state guarantees the existence of the class of wage laborers as the object of exploitation, creates the general conditions for production including legal relations. Capital itself, by contrast is not able to produce these foundations. Under the pressure of competition capital is forced to utilize all resources maximally regardless Of the social and material consequences; in consequence capital tends to destroy its own social foundations. Moreover, the establishment of the social preconditions of capital accumulation is only possible within an organizational framework which is not subjected directly to the limitations and restrictions of the market. The state performs the functions necessary to maintain capitalist society. It can do this precisely because the state, as a special institution, outside and above bourgeois society, is not subservient to the necessities of surplus production, as are capital units no matter how big. The appropriate form of the state under capitalism is therefore its special existence counterposed to capital units, and not the form as an "instrument of the monopolies". (The state becomes this only in a mediated sense.)

What, then, are the functions which a state in a capitalist society performs, that capital units cannot perform? There are essentially four areas in which the state is primarily active:

1) the creation of the general material conditions of production ("infrastructure");

2) the determination and safeguarding of the general legal system in which the relationship of the legal subjects in capitalist society occur;

3) the regulation of the conflict between wage labor and capital, and if necessary, political oppression of the working class - not only by political and military means;

4) assurance and expansion of the total national capital on the capitalist world market.

All these functions are, so to speak, general characteristics of the bourgeois state; yet they develop on the historical foundation of the accumulation of capital.

(1) Let us deal first with the material conditions of production. The general conditions of production to be produced by the state depend upon the historical stage of capital development. Viewed in terms of its material function for the social labor process, the functions of the railroad, for example, are the same today as they were a hundred years ago. Yet the railroad was privately operated in the nineteenth century and was a profitable form of capital investment, whereas today the railroad is definitely an unprofitable business for capital and thus represents an appropriate sphere of action for the bourgeois state. This is one example of the concrete historical determination of state activities in the creation of the general conditions of production. All that can be said on a general level is that the necessary productive processes taken over or at least regulated by the state must increase because of the historical tendency of the rate of profit to fall. The effect of this tendency is that more and more processes of production become unprofitable to capital units and will thus be abandoned or cut back, thereby disappearing from the sphere of competing capital.

A full understanding of this process requires comprehension of the dual nature of the capitalist production process, as both a labor process and one producing value (on the level of society as a whole). Capital units can provide a part of the material conditions of production demanded by any given unit.

Some capital units produce the prerequisites for production for others. This relationship is produced by market competition as a process of the social division of labor of various capital units. But another part of the material conditions of product' cannot be produced by these capital units, because their production is unprofitable. The result is that demands are made by the social labor process which cannot be fulfilled under capitalist conditions, which unite the labor and value-forming process What appears from the perspective of capital units as a prerequisite for production of this kind, appears from the viewpoint of the labor process as a sphere ignored by capital; it represents a kind of "vacuum" which the state must necessarily fill because in contrast to the capital units, the state is not subject to the necessity of creating value Those parts of the social production of value which are taken in and allocated by the state are, in its hands, not capital. For this reason, state functions of this kind always come out of a given social fund of capital, thereby limiting the capital accumulation of private capital units. This is an effective limit to state intervention: it cannot become so extensive that through it, private capital accumulation is exhausted. This limit is a direct result of the fact that the state is a non-capitalist in a capitalist society; were it, on the other hand, a capitalist in its own right, were the expenditures for production of a capitalist character, then it would be impossible to understand how the contradictions of capitalist society are sharpened by the increasing activity of the state.

The historical tendency of the rate of profit to fall constitutes one aspect of the reasons why capital is less and less capable of satisfying the demands of the labor process as a means of the process of the creation of value. The other aspect results from the growing level of productive forces, which - generally speaking - explode, the limited side of capitalist production, the production of future surplus-value.

Dealing with "tendencies" of capitalist development we must take into consideration their cyclical form. Along with the cyclical course of production, the current share of the state in the social product - which can be taken as a very crude indicator of the amount of state intervention - also fluctuates in quasi natural fashion. In the treatment of the problem of "stagnation" in the fourth part of this essay this relationship will become clearer.

After this sketch of one of the spheres of state activity, in providing the general material conditions of production, let us turn briefly to the other spheres mentioned above.

(2) While economic relationships in precapitalist modes of production and during the transition to capitalism are still constituted partly as unmediated relations of political force, with the development of industrial capital the direct intervention of the state is less and less an essential expression of unmediated force. The function of the state is now essentially the creation of the general prerequisites for free competition, including the elimination of frictions through the creation of general legal relationships and the enforcement of their observance.[9] It is for the first time through the regulation of the sphere of competition, exchange and capitalist property that capital is freed in competition to be able to continually fulfill the capitalist process of appropriation.[10] But never in bourgeois society did legislation limit itself exclusively to the sphere of competition. "The other essential part of the law of bourgeois society directly organizes relationships of domination, such as in penal law, labor law and so on."[11] Thus the bourgeois state codifies in law not only the general conditions of commerce between owners of commodities, but also the general conditions of labor, production and so on.[12] This activity of the state has its origins directly in competition, which forces different capital formations, as private capital relationships. The state, as the institution which is not subject to this competition, is alone capable of this regulatory activity. Its necessity and the specific functions indicated here result directly from the fact that the state, as an organ of the ruling class, and unlike private capital units, is not subject to the compulsion to create value, and can thus orient itself to the general interest of all particular capital units, This characteristic of the state enables it to create and oversee the observance of the laws, rules of competition expressed in such phenomena as state offices of weights and measures, testing laboratories or patent offices, and so forth. It also oversees the observance of the labor contract, which is no longer simply a question of commercial exchange among possessors of commodities, but one of the process of production as a process of exploitation of wage-labor by capital.

(3) We now move to a brief sketch of the function of the state in the regulation of the conflict between wage labor and capital. The general problem lies most directly in that the capital relation appears on the level of the market to be, in fact, a relationship among basically equal subjects, but is essentially a relation of domination and exploitation. Since capitalist society is a class society, because of constant class conflict and the necessity of its containment for the preservation of the basis of that society, the state also takes on functions involving the creation of the general conditions of exploitation, the regulation of wage rates and the suppression of class struggles. This functional domain of state actions is likewise the result of historical developments, namely the direct result of the counter-strategies of the ruling class which arose with the development of the working-class movements and their conscious struggles. Since in the case of class struggles the bourgeois class is always affected or even threatened as a whole, capital units cannot individually take over the functions of appeasement and repression;[13] this becomes more and more a realm of action for the "committee which handles the general interests of the ruling class."

(4) As the nation state, the state also encompasses all capital units within any given country in opposition to other nation-states on the world market. In this realm state functions can be most clearly seen as such: from the maintenance of domestic currency and political relations with foreign countries extending to military support of private capital accumulation and expansion in the era of imperialism.[14] The evolution of the realms of activity which the state must assume is even determined in regular fashion by its character as a nation-state, that is, by competition and struggle among nation-states.[15]

If we have discussed the functions of the state in successive isolation, it was of course, not with the idea that they could really be separated from each other in this fashion. On the contrary, the character of the state as a bourgeois state permeates all its functions; they serve in the final analysis to preserve and consolidate the capital relationship as a relationship of domination and exploitation against the working class. No abstraction can be made of that function. The problem which interests us here is the question of the extent to which the very maintenance of these functions produces contradictions, to what limitations the state is thus subject, what problems thus constantly result for capital, and what tactical consequences are to be drawn by the working-class movement.

The state as a form of capitalist social relations which exists outside civil society must appear to capital units as the negative limit of value-formation: it employs labor power to create the general material conditions of production, for the maintenance of the legal system, for police and military repression, realms which therefore are no longer at the disposal of capital as objects of exploitation (though from the viewpoint of the worker his work situation is the same as that of the workers employed by private capital)[16]. The state also sets external barriers to capital's drive to create value through the limitation of the working day or legal restrictions, etc. On the surface the negative barriers to the creation of value set up by the state appear to capital units as taxes, social burdens, etc. providing for "community services" which limit the individual consumption and/or production of surplus-value. Just as the natural boundary of the working day was, prior to labor legislation, the limit of capital in its drive for surplus-value, so after such legislation the limit was established universally by the state.

When the state is thus defined as an institution of capitalist society standing over and outside it, appearing simultaneously as grounded within that society and as a negative restraint on value-formation, then it becomes clear that the historical functions of the state are not originally inherent within it, but must be the results of crises of social production, mediated by class struggles and conflicts between fractions of the ruling class. No capital can voluntarily submit to specific, objectively perceived necessities; the pressure of competition will restrain it. Thus, no capital formation will agree to the growth of external, state-imposed limits on the realization of capital without external cause; it becomes disposed to such measures only when faced with catastrophes, conflicts and struggles. But this also means that class struggles have an important function in the maintenance of capitalist society, in that they aid in the emergence of objective historical necessities through the agency of the state.

Thus the growth of the state's share of the social product (as a crude indication of the state's functions in society), in the wake of the class struggle as in the wake of the First World War, and prior to and during the preparations for the great catastrophes of world history, the world wars can be taken as an empirical confirmation of this thesis. Even if Adolph Wagner speaks quite generally and with little basis of the "law of increasing state activity", and thereby expresses what is more a supposition than a well-grounded tendential observation[17] the fact cannot be denied that the German state's share of the social product has grown in this century from around fifteen to forty percent. It is also noteworthy that the expenditures of the state "in a phase of sustained economic growth expand less than in periods of more meager growth, except when there is a depression and a negative growth rate of the social product. In the latter case, there is a sharp increase in the proportion of state expenditures,"[18] This means that the activity of the state, insofar as it is tied to costs, is subject to the conditions of capitalist production.

Thus the state is to some extent complimentary to capital units within the framework of capitalist society, where by the "complimentary" nature of the state is always defined historically. This is clearly expressed even in the theories of "state interventionism" developed in different eras and countries. If Adam Smith, and in modified form Ricardo, limited the functions of the state more or less to the maintenance, of military, police, educational and judicial institutions and left everything else to the, "natural" economic development of private capital itself, then the nineteenth-century German theoreticians of finance (A. Schaeffle, L. von Stein, A. Wagner) ascribed an active role to the state in the development and the accumulation of capital. This theoretical differentiation expresses exactly the different situations of England and Germany in the accumulation of capital and world-market competition during the nineteenth century. It also demonstrates that social functions always first arise as state functions when they are not or cannot be provided by private capital. The autonomization of the state is thus grounded in the "nature" of capital relations, but the evolution of the real state constantly progresses in the particular historical conditions of a country in a give period; the decision as to what general conditions of production are "general" in the sense that they must be dealt with by the state and which "general" conditions can still be handled by private capital is first and foremost a question of the existing historical situation. We will deal with this problem more thoroughly in the following section in developing the example of the general material conditions of production.

3. The Creation of the General Material Conditions of Production by the State

We have seen that the reason for the autonomization of the state lies above all in the creation of the general conditions of production. It is now necessary to look int the prerequisites of material production and to ask why they are provided by the state and not by private capital. If we start from a general relationship of interdependence within a society, then the criteria dwindle for differentiating between general and particular conditions of production, and between general conditions of production produced by the state and those produced by capital.[19] Those functions which have ceased to be or are not yet performed by capital include, (at least as far as the material side is concerned): the establishment of a communication system (streets, canals, telegraph and postal services); the development of an adequate qualification structure for the productive forces (the educational system); maintaining the capacities of the work force (public health service); the water supply; the disposal of sewage and garbage; etc. There are a number of different reasons why it is not profitable to operate these processes on a capitalist basis.

But these reasons have nothing to do with their material characteristics. But it could, though, have to do with the fact that the capital investment is too large for a capital unit, and that the elapsed profit time ("Umschlagzeit") (labor time, production time, or circulation time) is too long. Another possible reason is that the results of these production processes do not have a direct commodity character (qualifications, research results[20]). Or it could be that the market (the socialized demand) is too small, in absolute terms, for profitable production, i.e., for the realization of the invested capital value plus the surplus value. It could also be that capital is not satisfied with a less than average rate of profit, even if it is still a positive one, when more profitable investment spheres exist, e.g., in foreign countries.

The longer the labor time and the more long-term the capital returns, and the larger the actual capital outlay, the more uncertain is the achievement of an average rate of profit. Further it happens that the result of the productive process for such capital is another type of commodities; since the use of a street, for example, can be or must be free to everyone, such investments cannot be operated on a capitalist basis, When the necessity for extending the "infrastructure" becomes pressing enough to demand special expenditures, then capital throws this upon the shoulders of the state. Or, if the state still has a traditionally superior position, it still has the privilege and the will to force the totality of capital units to put a part of their revenue, not their capital, into such generally useful work. These expenditures appear at the same time to be the general conditions of production and thus not the particular condition for any single capitalist. As long as capital does not take the form of a corporation, it seeks only the particular conditions of its own utilization and pushes the more general conditions onto the country as national necessities. Capital undertakes only what it considers lucrative ventures."[21]

In order to avoid misunderstandings, we have to speak of the production and operation of infrastructural institutions. It is clear that the production of a bridge is just as "productive", i.e., profitable, as the production of a machine or a suit. All three of these products are produced as commodities and exchanged on the market, though the form of each is, of course, different. The clothing manufacturer produces for a mass market; and when a buyer has bought a suit, the capitalist has recovered his investment plus made a profit, and the buyer has purchased a consumer item by spending revenue. The suit is of no interest to us in terms of value from this point on, but only as use value for the buyer. The use value is unimportant in economic analysis, as long as it is itself not form-determining - and this is the case after the exchange is completed. The machine producer, on the other hand, produces for an order by the machine buyer. But this is no way changes the fact that he still produces for exchange, for a market that is relatively unknown to him, and that with the transformation of the machine into money he completes an act of the circulation of his capital. In this sense he is in no way different from the producer of clothes. Of course, the case of the buyer of clothes is quite different from that of the buyer of machines. He buys the machines not with his income but with the money-capital he advances in order to start or continue a production process. The machine is therefore transformed into a part of productive capital; it is a means of production in the form of capital and will continue to circulate as capital. Let us now turn to the producer of bridges (for example, a construction firm). Here as well a commodity of a specific character is produced (by commission, prepaid, etc.) and in its sale, the producer realizes his invested value and surplus value, without which he would have foregone production. But he does not exchange that production for capital put forth in the form of money as was the case in the purchase of machinery, or for the income of an individual buyer for his consumption, but against revenue spent by the state. The state receives this revenue through taxes, tolls, and so forth in order to spend them for the creation of general conditions of production. The building of the bridge is thus thoroughly profitable for capital, but not its use. (No capitalist would advance his capital for the building of a bridge.) Thus it is decisive, in determining whether or not specific condition of production are to be assumed by the state, if, first of all, an advance of capital is going to pay off in capitalist terms, and, secondly, if the actual conditions of production are really necessary from the viewpoint of the social labor process. (It has already been mentioned that this necessity is recognized not only from insight but also governed by struggles, conflicts, catastrophes and crises.) General material conditions of production can thus be created quite easily, but cannot be profitably managed by individual capital units.

In the educational sector, one finds a different situation. What holds true for the above-mentioned bridge also holds true, in its material aspects, for this domain: school buildings, teaching materials, etc. can be produced by capitalist means. But the production of qualifications, to a greater extent, is a far different matter. They are already produced in state institutions, whereas they are put to use as a material element of variable capital by individual capital units. As an integral element in the formation of labor power, qualifications are exchanged on the labor market generally to the detriment of capital.[22] This difference between the transportation system (as well as school construction) etc., on one hand, and the educational system, on the other, raises serious questions. The state takes all infrastructural expenditures from the income of the country, which are thus at least partially subtracted from that part of the surplus-value capable of stimulating new accumulation. But expenditures for bridges or school construction flow to other capital units, which are thus put in a position to use their capital, insofar as the circulation of capital value is successful. Expenditures for the production of qualifications, and thus especially for teachers, do not however flow to individual capital units; they moreover make possible the existence of a stratum which removes a given amount of social labor time from exploitation by capital. This is particularly true for students in secondary and university education, who perform no productive labor during the time of their studies and who are thus temporarily removed from the direct rule of capital, but who, after their studies, with the higher educational costs related to them, can only confront capital with a higher value of labor power, without the decisive emergence of any elevated value-forming labor potential.[23] Expenditures for the educational sector thus not only subtract from the surplus value of capital, but in the case of their increase also raise the value of labor power, thereby diminishing the rate of surplus value in otherwise stable conditions. But, on the other hand, the teacher produces through his labor general qualifications as a condition making possible the general labor process as a means in the process of value formation, as well as capitalist production and the reproduction of the capital relationship. Only because of this aspect of the teacher's activity is capital willing to maintain the educational sector. The economic functions of the individual "infrastructural realms" are thus to be sharply distinguished from each other not merely in their material aspect, but also by virtue of their position in the process of capitalist reproduction.[24]

Since capital, for the reasons described, thus involves itself either not at all or inadequately in this sphere, the state has to take over the production of infrastructural institutions, since it is not forced to produce by capitalist methods (its funds come directly from the income of the country). On the other hand, capital will be put on its guard if the state takes over production processes which do in fact appear profitable to capital from its momentary and particular perspectives. For this would first of all mean an increase in labor that is unproductive from a capitalist viewpoint, and secondly the creation of a competitor who does not need to strive for maximum value formation from a capital investment.

That this is also expressed in regulations is no longer surprising. The West German municipal laws state that 1) the economic activity of the municipalities must be justified by a public purpose; 2) that the municipal financial economy must not be endangered; 3) that the expenditures must be in direct relation to the anticipated need and 4) that municipal activity presupposes that the economic objective cannot be achieved as well or as economically by private enterprise.

The annual statement of the Council of Economic Experts in 1971, states similarly: "The cardinal point of almost all economic-political considerations concerning the medium-range development of the economy as a whole is the demand of the state for a greater portion of the production potential. This demand is widely accepted, even though the problem of the quantity of such an expansion of its portion is viewed differently, since each expansion must only be made on the condition that the state extends its scope meaningfully and in any case does not merely deprive private business of its activities, but supplements and aids them ... "[25]

Of course we should not view all the processes as if they were detached from historical development. What in some cases seems profitable to capital in a certain historical situation does not seem so in another situation. When certain sectors of industry become unprofitable, there are first always state subsidies[26]; and then - when these do not help - these sectors are taken over by the state (coal mining in England after 1945). Conversely, the opposite tendency also exists to once again make an industry private when the work can be productively exploited, (e.g. the Volkswagen company).

In other words it becomes more apparent and simultaneously more concrete than stated in the previous section that the state's function in the capitalist production process is not only regulatory; as a consequence of its function based on its particular form of existence; it in fact helps capital to achieve its average existence as total capital. The state ensures the general conditions of production by taking over all those material processes which cannot be operated on a capitalist basis. Its function as a capitalist state which ensures the basis of the exploitation of wage-labor consists of taking over non-capitalist production processes, and regulating the conditions which actually effect the entire capital class and beyond that the entire society (legal relations, etc.), and of maintaining a power apparatus directed both internally and externally. Only in this manner can the state do justice to its function within the framework of a capitalist society. To express it more clearly: when we speak of the unified mechanism which encompasses state and monopoly, then we can only describe its mode of functioning by saying that the state, because of the demands of the productive forces of the labor process, has to create the conditions of production, which, because of the narrowness of capitalist relations of production, cannot be created by private capital. The state ensures the capital relation in that it acts in a non-capitalist manner; that is, by the general conditions of production created by the state, "capital" does not even enter into the picture. It is therefore inexact to speak of "state capital" without differentiating between infrastructural outlay and "profitable capital"[27] and false to claim: "The imperialist state confronts not only workers and employees in the immediate sphere of the state as a capitalist . . . "[28] If the state acts as a capitalist, then this can be explained only through the particular history and particular conditions of a country. This activity as a capitalist may occur in exceptional situations, such as the First World War in Germany (the term "state capitalism" has its origins in this period), in partial form in German fascism and in Italy and France after the Second World War. The capitalist mode of production is in no way abolished or surpassed ("aufgehoben"), even if the increase in production processes operated directly by the state is an unequivocal indication of the disintegration of advanced capitalism, of its stagnation and the lacking "private" investment opportunities.[29]

The state acts indeed - aside from the above mentioned historical exceptions -as a non-capitalist and as such limits the realm of private capital accumulation and repro uction. If the state were itself capitalist, then it would expand the sphere of capital prod tion and express everything but the disintegration of bourgeois society. The theory of state monopoly capitalism is itself contradictory in that, on one hand, it asserts that the state itself functions as a capitalist, but, on the other side, speaks of the general manifestations of the downfall of imperialism. (We deny the first assertion, not the latter.)

4. State Regulation of Crises

We will now attempt to analyze the functions of the state on the basis of the economic contradictions of society, contradictions which repeatedly and cyclically intensify into crises. We will also attempt to reveal the fundamental constraints placed upon the state by these contradictions. We will thus examine an area of state functions whose special characteristics have yet not been touched upon. At least since the "Keynesian revolution" however, this set of functions has acquired growing significance and has thereby contributed to erroneous evaluations of the effectiveness of state intervention. In order to assess the possible modes of state intervention however, it is necessary to reveal the reasons for the crises in the societal structure and to investigate the functions of such crises.

4.1 The Functions of Crises in Capitalist Society

On the most abstract level the function of crises can be defined in two ways: 1 "In the crises of the world market, the contradictions and contrasts of the capitalist mode of production are brought to a head ... "[30]. Crises are therefore nothing else than the contradictions of the capitalist mode of production that have been exacerbated to the limit. 2. "It is exactly through a crisis that the unity [of the mutually autonomous moments of capital development and of exchange - E. A.] is confirmed, the unity of different elements."[31] Crises therefore always imply the temporary resolutions of the contradictions, the unification of the autonomous moments and thus repeatedly create the conditions for a new period of capitalist accumulation. As the climatic form of contradictions, the crisis is exactly that which bourgeois economics labels the "purification crisis". Therefore, there are no "absolutely unsolvable situations for the capitalist economy. Even in the Marxist accumulation and crisis theory, capitalism does not collapse on its own, but finds its possible end in the political actions arising from crisis ... "[32] [3]. From this double function of crises it follows that capitalist accumulation must occur cyclically: its inherent contradictions drive it periodically to a crisis, this crisis purges the autonomous moments which account for the situation underlying the crisis and initiates a new expansionary phase - until a new crisis occurs. In contrast to bourgeois economics, Marx and the Marxists conceive of the industrial cycle not as a business cycle (Konjunkturzyklus) consisting of a series of fundamentally equivalent phases, but rather as a cycle of crises in which the crisis is the focal point which concentrates the contradictions of capitalism. The crisis - its severity, duration and specific solution - to a large extent determines the nature of the other phases of the industrial cycle. This has another implication for our analysis: an analysis of a crisis should not deal with the outward or apparent form of the crisis; on the contrary, it must, if it is to grasp the essential character and function of the crisis, demonstrate the fundamental contradictions of capitalism and prove why and under what circumstances it leads to crises.[33]

It is of course impossible to deal with all the manifestations of the present-day of capitalism and with the forms of state intervention and their consequences. We therefore restrict ourselves to one aspect, often described by the newly arisen concept "stagflation". We choose this problem because it shows very clearly how the state as "crisis manager" has not only completely failed, but has, because of the fundamental nature.of the capitalist mode of production (and entrapped in the contradictions of the capitalist system), produced stagflation as the specific manifestation of the crisis, because the state engages in Keynesian crisis management.

4.2 Keynesian State Functions and Stagflation

The concept of stagflation expresses the positive correlation of two tendencies which in the "classical" conjunctural cycle were correlated in a negative manner: "The rise in prices during boom periods is as old as the business cycle; the failure of prices to return to their previous level in a recession is a specific feature of the recent past."[34] What are the reasons giving rise to such a combination?

The rise in prices during the general growth in the capitalist world market which has taken place over the past 20 years, a growth which has only been interrupted by mild and short recessions, had a number of causes. First there is the rapid expansion of capital with consequent credit expansion in all nations involved in the world market; the second cause is the additional profits for developed capital (whether this be individual capital units within a nation or total national capital on the world market) which can be made during an expansionary phase. The existence of extra profits is shown by the fact that reductions in prices do not correspond to increasing productivity. There is thus always a moment of "relative inflation" as Hofmann calls it.[35] A third cause for the rise in prices during an expansionary phase is the disproportion of certain commodities due to the length of the production process. Since during the production period raw materials must be purchased and labor power paid, commodities are removed from the market without any new commodities being supplied in compensation, while on the other hand money enters into circulation. Finally, price rises result from the constantly growing state debt in the most important capitalist nations, above all in the USA. Since the capitalist nations are closely related in the world market, these above mentioned factors do not have to be present in every nation in order to have an effect on the process of national price inflation. As long as the world market is expanding, stagnation or recession which is restricted to one nation, as long as this nation is integrated into the world market community - and what capitalist nation today is not so integrated - will not lead to compensatory reductions in prices if a "disciplined" economic policy is carried out. The most that can be expected is a temporary decline in prices, as in West Germany after 1966. The limits for a successful national economic policy depend upon the world market community.[36] Thus, the Council of Economic Experts writes: "The system of Bretton Woods . . . has created an alliance with an inflationary trend. A large number of nations have goal conflicts in which they are driven, through increasing demands for the social product to make decisions which work primarily against monetary stability. Since these nations predominate, they can transform the neglect of monetary stability into a norm for the system, and ... also force the stability-conscious nations to follow the trend of creeping inflation in the world economy ... The inner imbalance of the system also has another characteristic: while inflationary impulses were always able, to expand unhindered, the disciplinary effects which should have proceeded from the stability-conscious nations - and which were completely indispensable for the functioning of the system - were increasingly intercepted and counteracted by the foreign exchange reserves of a world satiated with liquidity."[37] It is not our opinion that the world market inflation is directly the fault of the system of Bretton Woods. It is rather the result of the relationships of the world market of the capitalist nations in a general expansionary phase, regardless of the technical form of the monetary system. We feel that it is false to blame the "lack of discipline" of national economic policies on wandering foreign exchange above all that of the dollar, because this "lack of discipline" is the necessary consequence of the fundamental contradictions in developed capitalism. These contradictions have manifested themselves in new forms of state activity since the Second World War, and thus in the particular historical conditions under which the state guarantees conditions of production and therefore the reproduction conditions of the social system. Before this can be discussed further, it is necessary to briefly examine the other side of stagflation: stagnation.

Stagnation is a particular historical manifestation of a crisis, one in which the crisis is not followed by a business expansion. It is reflected by a state of the economy characterized by the fact that the purging function of the crisis has not yet had its effect: From a simplified point of view, that is in terms of the results, the crisis has purged the situation when the average rate of profit of an individual capital unit begins to climb after the fall which led to the crisis. In the crisis, forces must thus be in effect which, on the one hand reduce the capital advanced by the capitalists. This could occur, for example by the reduction of the price of elements of constant capital (raw materials and machinery) or through the reduction of the advanced variable capital (reductions in real wage and in the number of workers employed). On the other hand there must be forces which increase the rate of exploitation, primarily through the intensification of work and the lengthening of the work day. In other words, in order for a new expansion to take place, capital must be devalued, and the capital outlays which have not been devalued must yield a higher rate of profit, and ultimately a higher rate of surplus value in order that a new expansionary phase can take place.[38] There must also be a reduction in the interest rate and in ground-rents in order for the industrial profit to be able to increase. This is because the cycle's high points depend on industrial profits and not on interest bearing capital.[39] Finally, the possibility of sales must arise in order to be able to dispose of the newly produced value, for example, through the opening up of new outlets in world market. If these conditions are absent, or only partially present, then an expansion is doubtful, and a condition of "balance with underemployment" exists. This is stagnation, which is characterized by "the lack of investment opportunities" for private capital.[40]

The lack of investment opportunities applies naturally only to private capital accumulation. In the section in the first part of this essay on the conditions of production, we proceeded from the fact that the underutilization of capital can be stabilized in specific production processes in specific historical phases. Because of their special conditions such processes cannot, or can only with difficulty, be subsumed under capital as individual capital units, while in other areas of capitalist society there is an adequate utilization of capital for rapid accumulation. The state comes into play here, so to speak, for "structural" reasons. The situation is different, however, in the case of stagnation, which is characterized by inadequate utilization in the private sector. Now the function of the state is not to create general conditions of production in order to allow the social work process to act as a means for the utilization process of the many capital units. Its function is rather to assist in the creation of conditions which make the crisis superfluous, but which, nevertheless, in terms of its effect, fulfill its purging function. The state comes into play here, so to speak, because of the business cycle. At this point the state and its fiscal capacities are relevant: the stagnating capital accumulation is counteracted by state expenditures. For Keynes, the type of state expenditure was irrelevant[41], at least as far as the income and employment multiplier effects were concerned. We are thus in a position where Keynesian economics does not in any case wish to be, namely "in the world of Say's Law of Markets; only Government is the deus ex machina that insures effective demand,. . . "[42]

In relation to the problem of the creation of general conditions of production, we have here an example of how the state actually takes on a function corresponding to the conditions of the utilization of private capital. Thus it is not "by its nature" that the state has taken the responsibility for providing certain conditions of production and not others. What constitutes general conditions of production depends upon which functions capital itself cannot provide in a specific historical situation. In other words, if the conditions for the utilization of capital permit only a part of the working population of a country to be employed as productive workers (i.e., as capital producing workers), the only alternatives are either "underemployment" or their unproductive (i. e., non capital producing) employment by the state. The reason that the state does not compete with capital for labor power, or at least not to a greater extent, is that the state does not want to compete as a capitalist with other capital formations, because this would result in a further deterioration of the already insufficient utilization conditions for full employment.

Insofar as the state in this sense enacts measures to avert a general stagnation of the capitalist economy, it is producing, in its economic activity, certain effects that vary according to the types of outlay. The effects of the types of outlay should be briefly discussed.

1. If the state expenditures are favorable to the working class and do not restrict individual consumption (e.g., improved health and educational systems), then the distribution of the products of value improves in favor of the working class. This would, however, result in a reduced rate of surplus value and ultimately also in a reduced rate profit. Any steps taken that would have such an effect would therefore not achieve the elimination of stagnation by stimulating capital accumulation.

2. If the state expenditures are used to re-distribute the profit among the capitalist class (subsidies), then a positive effect on the accumulation process is conceivable only if the subsidized capital formations accumulate the received amounts, while those capital formations who paid for the subsidies through taxation, would have either consumed the corresponding amounts or held them in suspension - which would be very unrealistic in any case.

3. If the state expenditures are used for public projects, then one must distinguish what happens with the commodities purchased by the state - i.e., first from which part of the national revenue (either from income derived from wages or from profit) are they financed; and second, which of the two classes do they primarily benefit? For, ultimately, the effects of the state expenditures depend upon these differences. In this connection the following problem must be investigated: to what extent do the state expenditures return as money to the producers of the commodities, without the commodities purchased by the state remaining in the form of commodity capital or productive capital, in the circulation process of the many capital units. Such commodities thus drop out of the capital circulation entirely; they are "end-products" of consumption.

In this latter category fall, above all, armaments and military expenditures, which represent that form of state expenditures most popular for surmounting a phase of stagnation. Armament contracts and the concomitant contracts for other kinds of "waste production" make possible the realization of produced capital value precisely in those branch of industry which suffer the most during stagnation or a depression, namely the industries which produce the means of production (such an assertion is of course dependent upon the armament technology). Armaments neither raise the real wages of the working class, and therefore signify no redistribution of new values to the advantage of the working class; nor do they compete as productive capital with other private capitals. From the viewpoint of total capital, armament expenditures are financed from state revenue, which the state takes either from taxes - which are at least partially skimmed from surplus value - or from loans. But state loans are themselves borrowed from capitalists at a determined rate of interest on the capital market.[43] If, on the other hand, armament expenditures are "self-financed" by capital and return to this capital in the form of contracts, then the only possible conclusion is that the surplus value of the capitalist class is being re-allocated, through the mediation of the state, from that part of surplus value susceptible to accumulation and serving individual capitalist's consumption to that part which is applied, once again through state mediation, to destruction. This re-allocation, as far as the various branches of industry are concerned, means a greater emphasis on accumulation in the armament economy and the relative deceleration of accumulation in other sectors. If however, that portion of surplus value which is susceptible to accumulation is reduced, it is permanently used to reduce the amount of commodities on market, to pump money into capital circulation, and to pay the salaries of workers and above all, of non-workers (soldiers), - then it is clear that first, a permanent inflation of prices must result and that secondly, on the assumption that every accumulation increases the organic composition of capital, a deceleration of the rate of accumulation will offset the tendency for the organic composition of capital to rise and thus also for the rate of profit to fall.[44] Connected with this is a protracted increase of the debt, as we have already indicated in our discussion of inflationary factors.

The state thus comes into play in the case of stagnation. But can it also thereby fight stagnation on a long-term basis and create a situation of "equilibrium through full employment"? It cannot, or can only temporarily, as certain considerations will demonstrate. On the one hand, the extension of the armament sector and of similar sectors (space travel, etc.) is itself the most important factor for the growth of the state debt, which in fact within the social circulation process, requires an increasing amount of money which tends to cause an inflation of the monetary expression of value. For, as a result of the state-created demand, it is possible for individual capitalists to raise their prices. Why shouldn't they, given the improved chances for selling their goods on the market? 0ther capitalists, who are not themselves direct contractors with the state, are drawn into this process, resulting in creeping or even galloping inflation.

On the other hand, however, the tendency toward stagnation in a highly developed capitalist society cannot be overcome in this way. For even those capitals which do not produce for the market, where capitals are exchanged, but which produce for the state are forced by competition to function as capitals. They must therefore accumulate and that means that they must extend not only their production of surplus value but their output of commodities as well. Thus the state must buy more and more from these capitals. This means that there must be an increase in the state debt in favor of an tendential hypertrophy of the entire economy due to the armaments industry. The state now faces two alternatives. It can either permit this hypertrophy, and thus favor the accumulation in the armaments industry and thereby finally hinder other capital units.[45] Or else it can put an end to the hypertrophy and thereby condemn the armaments industry to stagnation at a certain point in its development.

In this consequence the particular function of the state in capitalist society manifests itself, insofar as an increasing number of production processes, due to the historical tendency of the profit rate to fall, can be maintained only through state measures re-allocating produced values. In the stabilization of general material conditions of production ("infrastructure"), there is a saturation point for state activity which results from the nature of the labor process. To be sure, this saturation point never needs to be reached in terms of conditions of "public poverty"; but it lies in the nature of that activity itself, just as a saturation point of individual or social needs is given for each commodity from standpoint of use value. Beyond this saturation point the production of the commodity, as well as the creation and management of the conditions of production, becomes superfluous. To use the words of Keynes: "Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York."[46]

The situation is quite different with those state functions which do not involve the creation of conditions of the labor process for all capitals, but only the utilization of ital units themselves through the re-allocation of values. In this case the state creates production processes which are precisely not non-capitalist, as is the case in the infrastructure; the state rather supports accumulating capitals through its expenditures. Here there is no saturation limit, because the utilization drive of capital knows no limit; here the state is supporting a realm of production whose maintenance is possible only through its permanent expansion. Insofar as state expenditures become a moment in the circulation process of capital units, to which they are allocated, they must expand, in accordance with the accumulation process of the capital units. Two pyramids, two masses for the dead are thus in fact better than one, and three are better than two, etc. - better for those capitals accumulating in these sectors.

Only the analysis of the character of the "Keynesian" function of the state makes it possible to deduce theoretically from the mode of crises management the necessity of stagflation, and thereby to establish the historical tendency toward stagflation. For this now has the following consequence: If the armaments expenditures and the economically corresponding state expenditures are permanently increased, then not only a high rate of inflation, but also a structural change in the economy and society are the consequences, with accompanying negative results for the conditions of reproduction of the capital relationship. This results above all because the armament and military expenditures must progressively increase if they are really to heed the necessities of capital accumulation. That such a progression can find its violent solution only in war has been proven many times in the history of capitalist states. Yet a stagnation or even a reduction in the armament expenditures increases the national debt absolutely with every expended unit of money. The inflationary tendencies continue, therefore, even further, if the military and armament expenditures stagnate or even fall. But stagnating armament and military expenditures, if stagnating at a still high level, means stagnation of the conditions of realization for those producing capitals in this sector, and therefore also stagnation of production, with the consequence of unused capital, decreasing contracts for those capitals that produce for capital expansion (producers of the means of production), deficient demands on capacity, and increasing unemployment.

State intervention in the Keynesian sense must therefore fail because, contrary to the Keynesian assumption, the mode of state expenditures is not unimportant to the development of capital. If the function of the state consists of making possible for the accumulating capitals the utilization and thereby the accumulation of capital, then the state expenditures must not be to the benefit of the working class nor result in establishment of competition to the capitals. State expenditures must be concentrated in a sphere where they are manifested neither in productive capital nor in the means consumption for the working class. The primacy of armament expenditures has therefore a deeper economic meaning in capitalism. Yet contained therein is the contradiction that the armaments and military sphere mediated by the state tends to displace all other societal spheres and all other capital units. If the armament and military expenditures verge on these limits, then the consequence can only be a war resulting in the destruction of the capital which is burdening the profit rate, or the curtailing or stagnation of armament and military expenditures. The latter alternative is, however, the cause of stagnation: the national debt continues to grow, as long as armament and military expenditures are undertaken; and thereby the inflationary pressure continues. But stagnation or a stagnating rate of growth of state expenditures, the sphere of private capital, which so to speak lives from these expenditures, is condemned to stagnation: this is stagflation.

We see, then, how renewed stagnation and crisis are tied into the Keynesian attempts to overcome stagnation. The original impulses of the state expenditures can positively affect the condition of the realization of capital and help stimulate production. This is especially the case when a war follows the armament expenditures and its result is not only the destruction of people, but also the destruction of capital ("devaluation") both physically and in terms of value, and thereby allows capital a new phase of accumulation with a high rate of profit ("reconstruction periods").[47] As long as this period lasts, the contradiction in the form of state crisis-avoidance strategy is covered up and the "antagonistic forces" are not developed to their fullest extent. In a general expansionary phase of the world market, as after the Second World War, stagflation cannot appear, or if it does, only in a limited way. Exactly the fact that indeed the military expenditures in all capitalist states have increased permanently - with, of course, a time delay: West Germany has developed an arms industry only since the end of the 50's, and Japan did much later - and that at the same time the conditions of the utilization of capital were so good that the state activity, as already mentioned, was per saldo relatively declining, shows that in the past 20 years the accumulation of capital has resulted mainly from forces immanent in capital itself. But as soon as the phase of rapid accumulation comes to an end: the profit rate falls due to the increasing organic composition of capital ("the tendency towards decelerated increases in profit")[48] [19], the contradiction mentioned here will come to bear. Mediated through the cohesion of the world market of the national total capitals, it becomes the manifest form in the entire capitalist world[49] [20], whereas up to now its expression as stagflation has been limited to a national basis (USA 1958).

That which is today characterized with the new concept of stagflation is therefore nothing new, only the naming of the contradiction inherent in the Keynesian strategy of crisis-avoidance, which at the end of a protracted world market expansion has historically climaxed in a visible form.


[1] The main participants in the discussion of this essay were Karlheinz Maldaner, Wolfgang Miller, and Christel Neususs. This essay is based on work which has evolved from seminars at the Otto Suhr Insitute.

[2] Even the category "state interventionism" is problematic. In its popular conception it implies a disjointed relationship between society, its economic structure, and the state. This essay is an attempt to criticize this notion. But since other concepts, such as "state regulation", "planned Capitalism", "crisis management", and similar ones, are not real alternatives, we shall retain the problematic concept of state interventionism.

[3] We would agree, in this sense, with Paul Boccara, in "Towards State-Monopoly Capitalism", Sozialistische Politik, 11, p. 11, when he writes that within state-monopoly capitalism, the state can be viewed as one component of a "unified mechanism which combines the power of the state and of monopoly."

[4] We will not go into the meaning of this category here, but refer to what is still the best treatment of this matter, Roman Rosdolsky's The Making of Marx's Capital, London, 1977, pp. 10-72, especially p. 41 ff.

[5] Marx and Engels, German Ideology, Marx-Engels Selected Works, I, p. 77; Moscow 1983.

[6] The state "is however nothing more than the form of organization which the bourgeoisie necessarily establish both internally and externally to guarantee their property and interests, the form in which the ruling classes assert their common interests, and the form in which the entire bourgeois society of an era constitutes itself." ibid.

[7] This is a criticism of those ideas (as they appear in certain variations of the theory of state-monopoly capitalism) which claim that the state is the tool of the most powerful monopolies, and which, as they are presented in most bourgeois theories, claim that the state is the autonomous subject of this regulation. It can be seen that the theories of state-monopoly capitalism are very divided on this question. On the one hand they maintain that there is a unified mechanism, which encompasses the power of the monopolies and of the state, or the intermingling of monopolistic power with that of the state. On the other hand, the state is conceived to be simply "the instrument of the monopolistic bourgeoisie". Take as an example Der Imperialismus der BRD, Frankfurt, 1971. It cannot be denied that stair and capital have merged into a unified mechanism; it is only a matter of carefully investigating the functional conditions of this "mechanism". The theoreticians of state-monopoly capitalism have not answered this question. Compare, for example, the most advanced variation of this theory: Paul Boccara, "Ubersicht fiber die Theorie der überakkumulationEntwertung des Kapitals and die Perspektiven der fortschrittlichen Demokratie", Sozialistische Politik, 16, p. 1 ff. For a development of the theory of state-monopoly capitalism, cf. Werner Petrowsky in Problems des Klassenkampfes 1, 1971.

[8] Engels, Anti-Duhring, Part III, Chapter 2, MECW 25, p254 : "And the modern state is again only the organization which bourgeois society creates in order to maintain the general external conditions of the capitalist mode of production against attack, by workers as well as by individual capitalists. The modern state, whatever its form, is an essential capitalist machine, the idealized total capitalist." We cannot agree with Engels' consequent statement: "The more productive powers that the state takes control of, the more it becomes the total capitalist." By taking over the capitalist production process, the state does indeed become an actual capitalist, however not the total capitalist. As a capitalist producer, the state is subject to the internal conflicts among the capital units, just as are other large capital units. As will be shown, it is exactly the establishment of the state as an actual capitalist which is problematic for capital.

[9] "The interest in the functioning of the flow of commodities and the use of labor products on the market leads to a legal system and the creation of political or state power. Coercion has to emerge ... as a coercion emanating from an abstract, collective person which is not exercised in the interest of the individual who actually enforces it ... but in the interest of all who participate in the system of laws. The power of one man over another is transformed in reality into the power of law, that is the power of an objective, non-partisan norm." From Wolf Rosenbaum, "Zum Rechtsbegriff bei Stucka und Pasukanis", in Kritische Justiz, Februrary 1971, p. 156. The primary quote in the text comes from Evgeny Pashukanis, Selected Writings on Marxism and Law (eds. P. Beirne & R. Sharlet), London & New York 1980.

[10] Cf. Grundrisse, p. 542 ff. Here it is expressed as "... the production founded on capital finds its adequate forms to the extent that free competition develops, for it is the free development of its conditions and its constantly reproducing processes which arc this condition. It is not individuals who are emancipated in free competition, but capital …" p. 543, f.

[11] Wolf Rosenbaum, op. cit. p. 159. While it is basically correct to assert that not only the sphere of exchange, but also the process of production is defined as a realm of the rule of capital, reservations must be expressed about the equation of penal, inheritance and labor law. For it is surely no accident that labor law as such arose only very late, and actually for the first time under Italian fascism, and thereby in conjunction with a state defined as "corporate". In the German civil code, the regulation of the labor contract plays only the most minimal role. That there is no labor code to go with the civil and commercial codes is directly related to the fact that capital is in the labor process "the master of the factors of production", and allows itself to be tread upon only in exceptional cases.

[12] See Capital, Vol. I, Ch. 8, in which Marx describes the establishment of the ten-hour day. Wolfgang Muller and Christel Neususs address themselves in examplary fashion to this problem in "The Illusion of the Social State and the Labor-Capital Conflict", in PROKLA, Special Issue No. 1, and SOPO 6/7.

[13] Here an important modification must be kept in mind. For large capital units also regularly maintain repressive apparatuses in the form of company guards, whose function is obvious! the repression of class struggles at the factory level. The examples of the attacks of such company police on demonstrating or protesting workers is an unequivocal proof of their character as a private army of capital. Cf. for example the presentation of Maurice Dobb, "Der Kapitalismus zwischen den Kriegen" in his Organisierter Kapitalismus, Frankfurt, 1966, pp. 116-124, on the actions of the big American corporations against striking workers, working-class functionaries and trade unions, which unmasked the idyllic appearance of the New Deal, of left-wing Keynesianism and the "welfare state" as the impoverished window dressing that it was. Cf. in addition the murder of Comrade Auverney by the company guard at the Parisian Renault works in February. 1972, and the multiple "emergency" maneuvers of West-German private guards which came to light up 1968, especially during the movement against the national emergency laws, but which were able to continue thereafter in the obscurity of a tolerated illegality. This furthermore shows how the sphere of the state and of private capital cannot be simply and sharply differentiated, bu on the contrary overlap in many domains.

[14] "Military investments can be seen as long-range complimentary investments, that is as investments which first of all make possible the expansion of the domestic (private) economy with any external threat. Of course this spectacle (!) presupposes an international "homo homini lupus" ... "Wilhelm Weber, "Wachstumeffekte der Staatsausgaben", in Finanztheorie, Horst C. Recktenwald, ed. Köln-Berlin 1969, p. 311.

[15] Cf. as well Neustiss/Blanke/Altvater, "Kapitalistischer Weltmarkt and Weltwahrungskrise", 102 in Probleme des Klassenkampfs, 1, 1971, particularly p. 112 ff.

[16] This does not mean that labor conditions and salaries are identical in state and private sectors. It is on the contrary more often the case that workers and functionaries in the public sector are the most poorly paid or work under the worst conditions. This is the case in England and France, but also in the Federal Republic. Cf. Detlev Albers, Werner Goldschmidt, Paul Oehlke, Klassenkampfe in Westeuropa, rororo-aktuell, Reinbek, 1971. This is a confirmation of the Marxist thesis, that unproductive laborers (civil servants, state functionaries and workers employed by the state) maintained as a rule by the value product of productive workers, are thus financed for the most part from surplus-value and find the limits of their salaries in the amount of existing surplus-value. The limits of state activity thus express themselves for individual state employees in lower salaries and inferior working conditions.

[17] Cf. Adolph Wagner, "Das Gesetz der zunehmenden Staattatigkeit", an excerpt from "Staat in nationaldkonomische Hinsicht", in Handworterbuch der Staatswissenschaften, Vol. 7, 1911, reprinted in Finanztheorie, cp, cit. pp. 241. Interpreted in terms of national economy, this law means absolutely and even relatively the growing extension of public and more particularly of state-run forms of collective organization a long side and in place of private forms in the economy."

[18] Horst Claus Recktenwald, Finanztheorie, op, cit. "Erganzung zur Wirksamkeit des Wagnerschen Gesetzes" p. 246.

[19] The question of the relationship of interdependence plays a large role in the bourgeois growth theory. The most advanced direction of this theory is that of "balanced growth", whose major representative, P. N. Rosenstein-Rodan, writes: "Complementarity makes to some extent all industries 'basic' r (Problem of Industrialization of Eastern and South-Eastern Europe, in A.N. Agarwala and S.P. Singh, The. Economics of Underdevelopment, New York, 1963, p. 252). In regard to our problem, this thesis implies the assumption that first, every production creates the general conditions of production, and second, that due to the general interdependence, no further differantiation need be made between state and private capital. Walter Wittmann presents a different, less naive argument based on this thesis of interdependence in Staatliche Aktivittit, wirtschaftliche Entwicklung, and Preisniveau, Zurich, 1965, p. 22: "It is first of all clear that private investments, which create additional production capacities, are by themselves insufficient to assure long-term development ... In order to avoid bottlenecks in the economic development, it is necessary that investments into the social capital (i.e., the general material conditions of production) keep pace with the total development . . "

[20] Research results acquire the character of a commodity: only when they are monopolized by the commodity owner in the form of a patent, and when only that person who has bought them as a commodity can use them. If the possibility of obtaining a patent exists, then research results will also be produced on a capitalist basis. Let it just be mentioned that this problem plays an important role in Schumpeter's theory of business cycles, because the motivated entrepreneur begins to produce precisely because of the technological advantage assured by patents.

[21] Grundrisse, p. 430.

[22] We will not go into the problematic of productive and unproductive labor. Cf. the discussion in Sozialistische Politik 6/7 and 8.1970.

[23] The problem of the value-forming potential of labor will not be pursued any further here. Cf. the contribution to the "reduction problem" in Altvater and Huisken, Materialien zur politischen Oekonomie des Ausbildungssektors, Erlangen 1971.

[24] In bourgeois economics all infrastructural realms are ranged indifferently under the concept of "social capital". Expenditures for "transportation systems, energy sources, water systems, education, justice, police and administration" are in our conception ... complimentary investments ... " Wilhelm Weber, op. cit. p. 306, Jacques Stohler, "On the Rational Planning of the Infrastructure" in Konjunkturpolitik,1965, and most other authors. A completely meaningless concept of capital complements an even more meaningless concept of investment, which subsumes all expenditures without the slightest conceptual distinction and moreover without reflecting their varied economic character.

[25] Jahresgutachten, 1971, Fig. 327: "All in all the natural conclusion is that growing investment by state capital can weaken the willingness of private investors." Even Wilhelm Weber differentiates "between branches which have been abandoned by private investors due to their unprofitable nature, and those in which the state competes with private investors." In the latter case, "state economic activities might at least inhibit the inclinations of private investors ... "(op. cit. p. 315) It here becomes apparent that the state cannot become a real total capitalist in the course of a quasi-unrestrained development. Because in these branches, in which capital can be used profitably, it is precisely private capital units which move in. If the state were to become active in this realm, it would be setting itself in opposition to the total interests of capitalist society, by reason or the fact that it would be acting as a capital unit.

[26] As a rule subsidies have the character of being surplus distributed by the state and no longer by competition. They ensure the maintenance of an average rate of profit by every capital unit. Naturally, subsidies can come from the revenue created by wage-laborers, in which case they lower the living conditions of the working class to the benefit of capital units.

[27] Cf., Paul Boccara, Ubersicht, op. cit. p. 3

[28] The Imperialism of West Germany, 1971, p. 366. It must be emphasized that this thesis does not run uniformly through this book; this is characteristic in general of the definite lack of precision which one usually finds in the "reference works".

[29] Paul Mattick, "Gemischte Oekonomie and ihre Grenzen", Soziale Revolution, No. 2,1971, f 6/6ff.

[30] Marx, Theorien uber den Mehrwert (Theories of Surplus Value), MEW, 26.2, p. 500 TSV II, p500

[31] Ibid., p. 501, TSV II, p500

[32] Paul Mattick, op. cit., p. 53

[33] Cf. Introduction to: Fred Oelssner, Die Wirtschaftskrisen, reprinted Frankfurt, 1971

[34] Gottfried Bombach, Trend, Zyklus and Entwicklung des Preisniveaus, in: Weltwirtschaftsarchiv, 1970 274. See also Helmut Arndt, Stagflation: Was man bisher nicht wusste, in: Wirtschaftswoche, Nr. 1/1972, p. 20 ff.

[35] Werner Hoffmann (Die Sakulare Inflation, Berlin, 1962) uses the concept of "relative inflation" to characterize a process in the course of which "the price level does not follow the long term rise in productivity - regardless of whether or not prices rise" (p. 10).

[36] Cf. Neususs, Blanke, Altvater, op. cit., PROKLA 1. Helmut Arndt writes, op. cit., p. 20: "Whoever today in the western world reverts to the methods of a national economic policy like those used during the international economic crises of the past, is overlooking the fact that national deficit spending cannot have the same effects in an international economic system as it can in an economy more or less self-contained by the regulation of foreign exchange."

[37] JG 71, Nr. 253: JG is an abbreviation for "Jahresgutachten" - the yearly statements of the FRG economic advisory council.

[38] This is the basis of the theory of "Overaccumulation-devaluation", as represented by Boccara above all (cf. the annotation by Esser in: KAPITALISTATE 1/1973, pp. 127-128). For him, of course, this has less to do with a cyclical phenomenon than with a structural solution to the problem of stagnation in state-monopoly capitalism. We agree with Boccara in so far as the bourgeois state is actually in the position of devaluating capital and thus stopping the tendency of the profit rate to drop. However (and Boccara hardly considers this point), this devaluation does first of all involve conflicts itself, since devaluation means nothing else than elimination of capital that could be profitably invested (and which individual capitalist will accept this fact without qualms). Secondly, this devaluation must be viewed in the total context of the problem of unproductive work (cf. in this connection Altvater/Huiskcn, in SOPO 8). Thirdly, the problem of devaluation is by no means eliminated in the cyclical course of capital accumulation: the problem of overaccumulation-devaluation is therefore more complicated than the model presented by Boccara.

[39] See in this regard an interesting bourgeois voice: Felix Somary, Krisenwende? , Berlin, 15 especially pp. 32 ff.

[40] This is where the stagnation theory of Keynes and Hansen fits in. In this connection see Sydney H. Coontz, Productive labour and Effective Demand - Including a Critique of Keynesian Economics, London, 1965, p. 125 ff.

[41] Cf W. Semmler and J. Hoffmann, op. cit., p. 60 ff., esp. p. 64

[42] Sydney H. Coontz, op. cit., p. 157

[43] See Mattick, op. cit., p. 47 and Mattick, Marx und Keynes, Frankfurt and Vienna, 1969, especially p. 140 ff.

[44] In this sense it is an error when Mattick writes: "It is an error to assume, as do Altvater and Huisken (Mattick is referring to the essay on productive and unproductive labor in SOPO 8 - E. A.) that unproductive labor geared to waste production weakens the tendency of the rate of profit to fall, although in their opinion the portion of surplus value susceptible to accumulation is thereby diminished ... " Paul Mattick, 'Arbeitsteilung und Klassenbewusstsein', in Soziale Revolution, No. 2/1971, p. 124

[45] This would have enormous consequences for the reproduction of capital and the social milieu. The necessary consequences would be inflationary process with the elimination of sections of capital, the impoverishment of the working class, the destruction of the social milieu of capitalism, the dismantling of the legal relations regulating capitalist production, etc., not to mention other probable military conflicts. Such consequences, only alluded to here, are always a tendency in capitalism, one which can be effectively opposed by sections of capital only in periods of general capital expansion. Cf. the presentation of the interests of West German industry in rearmament, in Gerhard Brandt, Rustung und Wirtschaft in der Bundesrepublik, Witten and 1966

[46] John M. Keynes, The General Theory of Employment, Interest, and Money (repr.), London, 1964, p. 131

[47] Cf. Franz Janossy, Das Ende der Wirtschaftswunder, Frankfurt, 1969. Angus Maddison, Economic Growth in the West, New York and London, 1964, p. 53, makes an interesting comparison of the relationships of gross profits and net value of fixed capital stocks and inventories. This of course does not include the profit rate. Yet both a temporal as well as a national comparison shows how much war has positively affected the profit rate, as defined by Maddison.

[48] The IFO Institut far Wirtschaftsforschung came to this conclusion in the economic section of its investigation in the framework of the RKW Study about economic and social aspects of the technological changes in West Germany, Frankfurt, 1970, p. 116

[49] I will not deal with this mediation here, since a fully developed position has already been developed in the essay by Neususs, Blanke, and Altvater, in PROKLA, No. 1. Cf. also Busch, Schuller, and Seelow, Weltmarkt und Weltwöhrungskrise Bremen, 1971 (Arbeiterpolitik)